Employment Law – Global Policy Watchhttps://www.globalpolicywatch.com
Key Public Policy Developments Around the WorldWed, 01 Apr 2020 00:30:47 +0000en-US
hourly
1 https://wordpress.org/?v=5.3.3&lxb_maple_bar_source=lxb_maple_bar_sourceNew Paid Sick Leave Requirements Impact Government Contractorshttps://www.globalpolicywatch.com/2020/03/new-paid-sick-leave-requirements-impact-government-contractors/
Wed, 01 Apr 2020 00:30:47 +0000https://www.globalpolicywatch.com/?p=9868Continue Reading]]>Recent legislation significantly expanded many workers’ entitlement to paid sick leave and paid family leave. These new benefits take effect on April 1st. Our employment and benefits experts have described those requirements in a series of posts, including overviews here and here, and New York-specific considerations here. Federal government contractors should pay particular attention to these new benefits and the way they interact with other paid sick leave requirements.

For several years, companies with contracts covered by the McNamara-O’Hara Service Contract Act (“SCA”) and the Davis-Bacon Act have been required to provide 56 hours of paid sick leave to their workers. Those requirements stem from Executive Order 13706, and covered employees may use the associated sick leave hours for a wide range of circumstances. The implementing regulations contain detailed procedural rights and protections for employees, and some defined rights for employers to guard against fraud and abuse of the benefits.

The Families First Coronavirus Response Act (“FFCRA”), as amended by the CARES Act, requires nearly all companies with 50 to 499 employees to provide 80 hours of paid sick leave. Although the number of hours is generous, these benefits are limited in time and scope: they expire at the end of December 2020; and can be used only for specific purposes related to Covid-19. In addition, contractors may be reimbursed for associated costs through refundable tax credits. Because of short deadlines in the FFCRA, the Labor Department’s Wage & Hour Division has been issuing helpful guidance in the form of Q&A on its website.

Federal service contractors raised several questions after FFCRA passed, including whether they could apply any portion of the existing 56 hours to satisfy the FFCRA and CARES Act requirements. The answer from the Wage & Hour Division is a clear “no.” The website lists the following hypothetical and response:

Q: If I take paid sick leave under the [FFCRA], does that count against other types of paid sick leave to which I am entitled under State or local law, or my employer’s policy?

A: No. Paid sick leave under the [FFCRA] is in addition to other leave provided under Federal, State, or local law; an applicable collective bargaining agreement; or your employer’s existing company policy.

That phrase – “in addition to” – appeared in an earlier version of the FFCRA, but was removed in the final version of the bill. That change led some observers to surmise that the deletion signaled an intent to give some credit for existing paid sick leave. At the same time, the bill retained other language explaining that the new paid sick leave would not “in any way diminish the rights or benefits that an employee is entitled to under any other Federal, State, or local law; collective bargaining agreement; or existing employer policy.”

The Labor Department’s position resolved any doubt about its interpretation of the FFCRA: the 80 hours must come on top of the 56 hours required by Executive Order 13706.

This situation continues to be dynamic, but federal contractors can take prudent steps to review their procedures and ensure the well-being of their workforce:

Monitor Wage & Hour Division guidance. Until more formal regulations are issued, these bulletins and online resources will be the most authoritative source of the government’s views.

Track FFCRA paid sick leave carefully. Ensure that human resources departments accurately account for different types of paid sick leave, and do not inadvertently “diminish the rights or benefits” of an employee covered by Executive Order 13706. Pay particular attention to the procedural rules that apply to “standard” paid sick leave, and consider how they may apply to FFCRA paid sick leave.

Maintain guardrails around bona fide fringe benefits. The Service Contract Act requires covered contractors to offer bona fide fringe benefits, but prohibits them from claiming credit for benefits that are required by other laws. When Executive Order 13706 was issued, the Department recognized the complexity of disentangling the value of existing bona fide paid sick leave benefits, and eventually published new, lower wage determination rates for contractors impacted by both the SCA and the Executive Order. We have not seen a similar initiative for FFCRA paid sick leave.

Update employment handbooks and policy manuals. Consider publishing an addendum to existing policies to explain these (temporary) rules to covered employees. The update could also be an opportunity to distribute the new required poster that explains these benefits.

Stay tuned for legislative updates… and potential expansions. While the CARES Act was in progress, the Democratic-led House released a competing bill that would have significantly expanded the scope of paid sick leave benefits. Influential Democratic Senators made similar efforts in their own chamber’s debate. We expect to see these initiatives continue when Congress considers the next tranche of Covid-19 legislation.

As always, we hope our readers and their families are safe and healthy. For additional resources to help respond to Covid-19, please visit our Toolkit.

This post appears concurrently on other Covington blogs, including Inside Government Contracts.

]]>Hiring Employees vs. Independent Contractors: Navigating Classification Issues in a Drastically Altered California Legislative Landscapehttps://www.globalpolicywatch.com/2019/10/hiring-employees-vs-independent-contractors-navigating-classification-issues-in-a-drastically-altered-california-legislative-landscape/
Tue, 08 Oct 2019 14:25:54 +0000https://www.globalpolicywatch.com/?p=9522Continue Reading]]>Recently enacted California Assembly Bill 5 (“AB-5”) is a game changer for businesses that use independent contractors in California — and a warning shot for employers nationwide. Subject to exemptions for certain occupations and professions, AB-5 imposes a strict “ABC” test that appears to put a thumb on the scale of classifying workers as employees rather than independent contractors.

The ABC test was adopted last year by the California Supreme Court in its Dynamex decision to determine classification of workers for purposes of the state’s Industrial Welfare Commission Wage Orders. For 20 years before Dynamex, worker classification was governed by the more relaxed “Borello” multi-factor test, which focuses on the hirer’s right to control an individual’s work and other secondary factors. AB-5 now makes the ABC test the default standard for determining worker classification — not just under the Wage Orders, but also for all California Labor Code, unemployment insurance, and workers’ compensation claims.

As a result of the passage of AB-5, companies that hire consultants or contractors based in California should take a hard look at those relationships and determine whether they need to reclassify any such individuals as employees. For other companies, this legislation should be monitored as the potential tip of an iceberg of a trend in many states, and potentially nationwide, toward imposing additional hurdles in classifying workers as independent contractors.The ABC Test Under AB-5

Under the ABC test codified in AB-5, a person providing labor or services for remuneration must be treated as an employee, rather than an independent contractor unless the hirer can demonstrate that all three of the following conditions are satisfied:

The person is free from the control and direction of the hiring entity in connection with the performance of the work. This prong must be satisfied both under the terms of the contract and in operation. If the contract gives power to the hiring entity to control the individual’s work or the hiring entity insists on exercising such power even without such contractual authority, the worker will be deemed to be an employee under the ABC test.

The person performs work that is outside the usual course of the hiring entity’s business. This prong requires a fact-based inquiry that at times (but certainly not always) will produce clear-cut answers. For example, a plumber hired by an accounting firm to fix a toilet is performing work (plumbing) that is outside the entity’s usual business (accounting).

The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. Performing work for multiple clients, or at least the ability to do so (g., a worker owning a business in a similar field or generally representing himself or herself as being available to perform similar work), helps demonstrate satisfaction of this prong.

The AB-5 test purports to be a mere declaration of existing law with respect to violations of the Wage Orders of the Industrial Welfare Commission and violations of the Labor Code relating to Wage Orders. For all other purposes, the AB-5’s test’s application to the Labor Code take effect in 2020.

Who’s Exempt?

AB-5 exempts a number of occupations and professions from the strict ABC test and specifies that the Borello factors (with some exceptions) apply to the determination of whether these individuals should be classified as employees or independent contractors. Notably, AB-5 applies the enumerated exemptions retroactively to the extent that they would relieve an employer of liability. The exemptions include:

Professional Services Exemption. Enumerated professional services are eligible for exemption from the ABC test, including, marketing, human resource administrators, travel agents, graphic designers, grant writers, fine artists, still photographers, payment processing agents, and licensed estheticians and manicurists, among others. (For the full list, see Cal. Labor Code § 2750.3(c).) To qualify for this exemption, the hiring entity must demonstrate that that several conditions are satisfied, including that the individual (A) has the ability to set his or her own business hours and rates and maintains a business location separate from the hirer, (B) is customarily engaged in the same type of work with other hiring entities, and (C) customarily and regularly exercises discretion and independent judgment in performing the services. In addition, for any work performed more than six months after January 1, 2020, the individual must have a business license. (For full details on this exemption, see Cal. Labor Code § 2750.3(c).)

Other Exemptions. AB-5 provides a number of additional exemptions, including for business-to-business contracts, real estate licensees, and repossession agencies subject to the California Business and Professions Code (which, notably, may default to the rules of the California Business and Professions Code, Unemployment Insurance Code, or Section 3200 of the Labor Code rather than the Borello test, depending on the circumstances), construction subcontractors, and “service providers” that provide, for example, minor home repair, moving, tutoring, event planning, home cleaning, pool and yard cleanup, web design, and dog grooming and walking. (For a full list of these exemptions, see Labor Code § 2750.3(d) through § 2750.3(h).)

Business Impact of AB-5

Businesses impacted by AB-5 will face complicated, and potentially costly, decisions as to whether and how they should make changes to the classification of their workers as independent contractors. Impacted business should determine if they can rely on an exemption, and if not, whether they can satisfy the ABC test, which in many cases may involve fact patterns that present close calls. Whether or not to reclassify in such situations may come down to a business’s risk tolerance.

Consequences of this determination can be expensive. Employers of individuals formerly classified as contractors have to pick up normal employment costs, such as the employer’s portion of federal and state withholding taxes, workers’ compensation insurance, sick leave, business expenses, unemployment insurance, and, to the extent applicable, the cost of coverage under employee benefit plans and programs. Balanced against these costs of reclassification is the risk of maintaining a consulting arrangement with workers that arguably could be treated as employees under AB-5. Failure to comply with AB-5 can lead to expensive legal claims, such as for failure to pay minimum wages and overtime, meal and rest period violations, waiting time penalties, and unemployment insurance violations, to name just a few.

These risks are compounded by existing and new enforcement mechanisms that empower workers and government entities to bring claims against employers for misclassification. Under the existing Private Attorneys General Act, workers may bring claims to recover civil penalties for Labor Code violations stemming from worker misclassification. And, under a new enforcement mechanism in AB-5, the California Attorney General and certain city attorneys and prosecutors may bring claims for injunctive relief against companies they believe to be misclassifying workers — adding a new level of risk for employers that typically faced risk of misclassification lawsuits brought by workers only.

What’s Next

Although businesses that operate in California need to grapple with AB-5 now, the topic of worker classification in California is likely not settled. In his signing message, Governor Newsom indicated he would continue discussions with business and labor groups.

In addition, companies around the country should pay close attention to similar pending legislation, such as in New York, Oregon and Washington. Worker classification is also on the national agenda, as multiple Democratic presidential candidates have indicated their support for AB-5 and similar measures.

]]>Workforce Policy Developments in the Trump Administrationhttps://www.globalpolicywatch.com/2019/02/workforce-policy-developments-in-the-trump-administration/
Fri, 22 Feb 2019 16:31:21 +0000https://www.globalpolicywatch.com/?p=9186Continue Reading]]>Last week, the Commerce Department officially named the 25 individuals appointed to the American Workforce Policy Advisory Board. This announcement is the latest in a series of steps that the Trump Administration has taken to implement its workforce policy agenda. With the Advisory Board set to begin work, it is a good time to assess the state of these policies since the president first took office.

President Trump’s first major workforce policy initiative related to apprenticeships — programs that combine paid work with industry skills education. Executive Order 13801, titled “Expanding Apprenticeships in America,” was signed in June 2017 and aims to expand the number of apprenticeships in the United States to 5 million over a five-year period. The EO increased apprenticeship program funding to $200 million, paid for by cutting other skills development and workplace readiness programs overseen by various federal agencies. The EO also diminished the role of the federal government in creating and monitoring apprenticeship programs, shifting that role to third party private entities, including trade groups, labor unions, and businesses.

EO 13801 also established a Task Force on Apprenticeship Expansion, which was charged with identifying strategies and proposals to promote apprenticeships throughout the country, especially in sectors where existing programs are insufficient. The Task Force issued its final report in May 2018. A subsequent Training and Employment Notice published by the Labor Department incorporated portions of the Task Force’s findings to establish standards that it will use to evaluate and certify third party providers’ apprenticeship programs.

In July 2018, President Trump expanded on his workforce policy agenda with the Pledge to American Workers, an initiative that recruits U.S. companies and trade groups to pledge to expand programs that educate, train, and reskill American workers. Since July 2018, the initiative has secured over 6.5 million new opportunities pledged from 200 private sector companies. A bipartisan group of 41 governors has also signed the pledge.

A signature piece of the initiative is the National Council for the American Worker, created through Executive Order 13845. The Council is a federal interagency body tasked with creating a national strategy to increase job training opportunities for students and workers through education, skills-based training, and other means of workforce development. The purpose of this initiative is to prepare Americans for the 21st century economy and cultivate a demand-driven approach to workforce development. The Council will devise recommendations on how the federal government can foster partnerships with private employers, educational institutions, labor unions, local governments, and other non-profit organizations to create and promote workforce development strategies that provide evidence-based, affordable education and skills-based training for youths and adults.

EO 13845 also created the American Workforce Policy Advisory Board. The Board is co-chaired by Commerce Secretary Ross and Ivanka Trump, and it is responsible for providing advice to the Council on federal workforce policy, including recommending steps to encourage the private sector and educational institutions to combat the skills crisis by investing in and increasing demand-driven education, training, and re-training, including through apprenticeships and work-based learning opportunities. The recently-announced members of the Board are made up of leaders in the private sector, educational institutions, and states in order to provide diverse perspectives on education, training, and re-training for American workers.

With the Board now in place, businesses can expect the Trump Administration to continue pursuing a workforce policy agenda focused on 21st-century skills training, deregulation, and increased public-private partnerships. For example, the President’s recent Executive Order on Maintaining American Leadership in Artificial Intelligence directs federal agencies to provide educational grants for AI-oriented worker training and coordinate with the National Council for the American Worker on matters regarding AI and the workforce. Further activity should be expected pending public reports by the Council and the Board.